A quick look at the numbers for the first three quarters of 2011 suggests that there’s good news for the law firm industry—and some cause for concern. Collections were strong during the third quarter, but growth in demand slowed, leading to a notable reduction in the growth of inventory—work that has been performed but not yet collected on. So as firms headed toward the end of the year, they needed to consider carefully how hard to push for collections and how many expenses for 2012 to prepay in the fourth quarter of 2011.
For the first three quarters of 2011, revenue was up 5.2 percent across the industry, gaining momentum from the middle of the year. The increase was driven by strong inventory levels at the end of the first half of 2011, rate increases holding steady, and a likely continued improvement in realization—all of which offset the slowdown in demand growth.
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